Secretary for Justice v. Yuen Wai Shan and Another

HCMP 161/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 161 OF 2012

(ON AN INTENDED APPEAL FROM DCMP NO 2261 OF 2011)

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BETWEEN

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Before: Hon Kwan and Fok JJA

Date of Decision: 11 May 2012

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DECISION

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Hon Kwan JA:

1.This is an application for leave for appeal to the Court of Appeal by Shun Fat Pawn Shop, the 2^nd claimant in the interpleader proceedings in DCMP 2261/2011. The interpleader summons was taken out by the Secretary for Justice on behalf of the Commissioner of Police, as the true owner of the three gold items, Madam Yuen Wai Shan, and the pawn shop were unable to reach agreement of how the loss occasioned by the unlawful pawning of those items stolen from Madam Yuen should be borne.

2.On 23 November 2011, Deputy District Judge Grace Chan entered judgment for Madam Yuen and ordered the pawn shop to deliver the three gold items to her without payment. The pawn shop was ordered to bear the costs of Madam Yuen in the interpleader summons and the costs of the Secretary for Justice previously agreed at $9,500. The reasons appeared in the judgment handed down that day.

3.The pawn shop applied to the judge for leave to appeal to the Court of Appeal. This was refused by the judge on 11 January 2012 in her decision.

4.On 26 January 2012, the pawn shop renewed its application for leave to appeal to this court on the grounds set out in the draft Notice of Appeal attached to its summons. This was accompanied by the submissions of its counsel Mr Charles Manzoni and Mr Christopher Chain. I shall treat counsel’s submissions as the statement in support of the pawn shop.

5.Madam Yuen has not filed a statement in opposition. The solicitors for the Secretary for Justice have written on 15 February 2012 stating that they adopt a neutral stance.

6.Pursuant to the powers of this court under Order 59 rule 2A(5)(a) of the Rules of the High Court, this application is determined on the basis of the statement in support without an oral hearing.

7.Under section 63A(2) of the District Court Ordinance, Cap. 336, leave to appeal to the Court of Appeal shall not be granted unless the Court of Appeal is satisfied that the appeal has a reasonable prospect of success, or that there is some other reason in the interests of justice why the appeal should be heard. Reasonable prospect of success involves the notion that the prospect of succeeding must be “reasonable” and therefore more than “fanciful”, without having to be “probable”. Counsel relies on both limbs in section 63A(2) in seeking leave to appeal.

8.The applicable law in the determination of the interpleader summons is section 23 of the Pawnbrokers Ordinance, Cap 166, which provides in sub-section (1)(a) that the court shall dispose of the goods in the manner provided by the section where it appears that any goods have been unlawfully pawned. Sub-section (3) provides that in making an order under (1)(a), the court shall take into account the conduct of the owner and of the pawnbroker and consider whether the fault or carelessness of either party has caused or contributed to the unlawful pawning of the goods.

9.Section 23(3)(a) provides that where the court finds that (i) no fault or carelessness in the conduct of both parties; or (ii) equal fault or carelessness in the conduct of both parties, has caused or contributed to the unlawful pawning, the court is to apportion the loss or damage in equal shares.

10.Section 23(3)(b) provides that where the court finds the fault or carelessness in the conduct of the owner or of the pawnbroker has caused or contributed to the unlawful pawning in the whole or in greater part, the court is to apportion the loss or damage in such whole or greater part, having regard to their respective shares in the responsibility for such unlawful pawning.

11.The unlawful pawning here was done by Madam Yuen’s foreign domestic helper, who had been working for her family for nine years. The three gold items were pawned with the pawn shop on three occasions over a period of four weeks from 8 January 2009 to 6 February 2009, for a total value of $8,400. The domestic helper left Hong Kong for good two days after the last item was pawned. Madam Yuen did not discover her loss until almost a week after, when she received demand letters addressed to this helper from a credit company. The three gold items are one gold necklace, one gold necklace with pendant and one gold bracelet. They were wedding gifts received by Madam Yuen in 1996. In addition to the three gold items, the helper stole from Madam Yuen another nine pieces, being two watches and gold jewellery items, also unlawfully pawned at a total value of $35,400.

12.The stolen items were kept in two locked drawers installed at the bottom part of the wardrobe in the master bedroom. The locks were combination locks of three digits and the pin code was known only to Madam Yuen and her husband. The three gold items were kept inside a Chinese-style jewellery box placed in the upper locked drawer. The last time Madam Yuen checked the gold items was at the end of 2007 when she was thinking of giving away a gold item as a wedding gift to a relative. When she found out the gold items were missing in February 2009, she noticed that the upper drawer was in good condition. The combination lock was intact and showed no signs of tampering or breakage.

13.The judge held that there was no fault or carelessness on the part of Madam Yuen. She applied the law in Legrand Jewellery (Mfg) Co Ltd v Wo Fung Pawnshop (a firm) & Ors [1988] 2 HKLRD 326, in which Hunter JA stated these propositions at 330 to 331:

(1)     In considering whether the owner and the pawnbroker were at fault or careless, the court does not apply the same standards to each. What has to be considered is the fault or carelessness of the owner qua owner and the pawnbroker qua pawnbroker. They do not stand in the same position. Each must be separately judged by the standard of the hypothetical reasonable owner or pawnbroker, as the case may be.

(2)     Taking first the position of the pawnbroker, he is always on risk of being offered stolen goods. It is a risk which arises daily and must therefore constantly be in the forefront of his mind. The practice of thieves in relation to pawnbrokers in Hong Kong is notorious. They readily use pawnbrokers as receivers, with not the slightest intention of redeeming the goods. It follows that the pawnbroker’s risk of accepting the stolen goods is both real and double-edged. The legislature must have expected pawnbrokers to take serious and effective steps to reduce this risk, if they were not to be held to be the sole effective cause of an unlawful pawning.

(3)     By contrast, the position of owners is very different. First and foremost they are not conducting a risky business or constantly on risk. The hypothetical reasonable owner does not have, or need to have, security at the front of his mind. He will take reasonable not obsessive care. Equally the hypothetical reasonable owner is not constantly concerned with the fidelity of his staff. He is not obsessed with the risk of hiring a thief. When the legislature used the word “carelessness” in section 23(3), it was not expecting owners to be judged by the standard of the perfectionist or with the wisdom of hindsight; but rather by the standard of the reasonably sensible owner. “Carelessness” here should be construed as a failure to take what any owner would regard as an obvious precaution, and it might have been described as “gross”.

14.Applying those principles, the judge took into account that the helper had been working for Madam Yuen for nine years, with nothing phenomenal in her integrity and indeed some degree of trust was established between the employer and the maid. Further, Madam Yuen did keep the gold items in safe custody, as described above. She found no fault or carelessness on Madam Yuen’s part as owner.

15.Mr Manzoni contended the judge was in error in holding there was no fault or careless on Madam Yuen’s part because (1) there was occasions when the maid was left alone at home; (2) there was no evidence as to how often the combination lock of the drawer was changed; (3) the maid would have had ample opportunity to discover the combination through trial and error; (4) it was unreasonable for Madam Yuen not to check more regularly the gold items and other pieces of jewellery in the locked drawer.

16.In my view, these contentions of counsel that Madam Yuen was at fault or was careless are untenable. A tribunal, correctly applying the law as stated by Hunter JA above, would not have come to any conclusion other than that as reached by the judge. As there was no fault or carelessness on the part of Madam Yuen, these alternatives canvassed by Mr Manzoni – that there were equal degrees of fault or carelessness in the conduct of both (section 23(3)(a)(ii)), or the fault or carelessness in the conduct of the owner or of the pawnbroker has caused or contributed to the unlawful pawning in the greater part (section 23(3)(b)) – simply does not arise.

17.Hence, the only possible conclusion that could be reached in this situation is: whether there was equally no fault or carelessness in the pawnbroker’s conduct (section 23(3)(a)(i)), or whether the pawnbroker was at fault or careless. In the latter situation, the pawnbroker’s fault or carelessness would have caused or contributed to the unlawful pawning in the whole (section 23(3)(b)), as the owner could not be regarded as at fault or careless in any way.

18.The judge held that the pawn shop was at fault or careless and that its fault or carelessness had caused or contributed to the unlawful pawning. The judge was guided by the approach of Hunter JA that a pawnbroker has a duty to stay alert and ask appropriate questions if he has suspicions. The judge was of the view the pawn shop should be suspicious when the domestic helper came to pawn three times within a month for items worth more than two months of her salary. And yet on the evidence of Mr Hon Yin Kwok of the pawn shop, he had done nothing more than the bare minimum when he made enquiries of the maid on the three occasions she came to pawn the goods. He did not ask if the gold items belonged to her, and if so, for how long. He did not ask for any receipt of the gold items. And the pawn shop had not installed computers making it easier to trace suspicious clients who pawn frequently over a short period, notwithstanding that over 70% of the pawnbrokers have done so.

19.Mr Manzoni attacked the finding of fault and carelessness arguing that no suspicion should have been aroused by the domestic helper pawning three times within a month. I disagree. The standard expected of pawnbrokers, as explained by Hunter JA, is “serious and effective steps” to reduce the risk that must be constantly in the forefront of their minds of being offered stolen goods. I do not agree it is sufficient for pawnbrokers to rely solely or heavily on the daily list of reported missing properties provided to the pawnbrokers by the police, for the obvious reason that the unlawful pawning may have happened before the theft is reported. 

20.Mr Manzoni argued that the lack of a computer system was not causative of the unlawful pawning. Leaving that aside, one has to consider whether what Mr Hon did or did not do, in the absence of a computer system, was sufficient to discharge his duty as expected of pawnbrokers under section 23(3).  On Mr Hon’s evidence, he claimed it was “not possible” to cross-check past pawn records, which were written by hand, each time to see if there was any client who had pawned repeatedly within a short period. It would not be as convenient as checking on a computer, but I fail to see why it was not possible to check the hand-written records for frequent pawning within a short time. 

21.I see no reasonable prospect of overturning the judge’s finding that the pawn shop was at fault or was careless and that its fault or carelessness had contributed to the unlawful pawning.

22.Lastly, Mr Manzoni argued there is some other reason in the interests of justice why the appeal should be heard, citing news coverage of this case which concerned a foreign domestic helper as indication of public interest. I do not agree with this. The law has been clearly propounded for more than twenty years by the Court of Appeal. Applied with common sense to a particular fact situation, it has not given rise to any difficulty.

23.This application for leave to appeal should not have been brought. I would dismiss the pawn shop’s application for leave to appeal. As the application is entirely without merit, I would make a further order pursuant to Order 59 rule 2A(8) that no party may under rule 2A(7) request the determination to be reconsidered at an oral hearing inter partes.

24.As the other parties to the interpleader proceedings have not made submissions in this application, I would make no order as to costs.

Hon Fok JA:

25.I agree with the decision of Kwan JA and the orders she proposes.

The Secretary for Justice, represented by Messrs Lo & Lo

The 1st Claimant (respondent), acting in person

Mr Charles Manzoni and Mr Christopher Chain, instructed by Messrs Ivan Tang & Co, for the 2nd Claimant (applicant)